Buying an existing business is often easier than starting from
scratch. But scratch you must to dig up relevant information that
may not be readily offered by the existing owner or business
broker. Before making any important decisions, check the numbers
and ask pointed questions.

Study the financial records provided by the current business
owner, but don't rely on them exclusively. Instead, insist on
seeing tax returns for at least the past three years. Also ask for
the sales tax records, where applicable.

Find out how the owner determined the asking price. Together
with your accountant, decide whether assets and expenses were
realistically valued. Business owners often assess outmoded assets
overgenerously or fail to recognize changes in the neighborhood and
their impact on property value.

Who are the employees? In a family operation, salaries may be
unrealistically low, resulting in a bottom line that's
unrealistically high.

If you plan to change the image of the business, will the
current inventory still be valuable to you? How will changing the
business impact the existing customer base?

You may not be able to answer all these questions
satisfactorily, but addressing them can guide your decision to
pursue the purchase and give you better bargaining leverage.

Paul DeCeglie is a former staff reporter for Journal of
Commerce and American Banker. He can be reached at MrWritePDC@aol.com

Spy Vs. Spy

Even if your business is profitable, you may be suffering
losses--the kind that stem from crime. Such losses can destroy even
the healthiest business, but fortunately, most are preventable.

Beverly Hills, California, security and investigative consultant
John Dresden has operated Probe Inc. detective agency since 1974.
Though Dresden carries an impressive array of security equipment at
his 4-year-old Spy Tech Agency, he says, "There are protective
measures you can take that don't require large cash
outlays."

Start by enrolling in a crime prevention class for business that
teaches you how to spot shoplifters, how to handle cash and more.
Call your local Better Business Bureau or chamber of commerce for
more information.

Good locks are a must to prevent burglaries, says Dresden; they
should be rekeyed if you have employee turnover.

Mount a visible, realistic-looking dummy camera and post signs
warning would-be offenders that the premises are protected by a
security system and a neighborhood patrol.

Show And Tell

Infomercials are more than just a great way to sell a product.
"[They're also] one of the most effective tools in
generating consumer demand to get your product into retail
stores," says Tim Hawthorne, an infomercial industry pioneer
and author of The Complete Guide to Infomercial Marketing
(NTC Contemporary Publishing, $60, 800-323-4900).

There's a catch, of course: Infomercials are expensive.
Hawthorne, whose Fairfield, Iowa, company, hawthorne direct,
specializes in creating, producing and managing marketing
campaigns, says producing and airing a 30- to 60-second test spot
for one week costs between $25,000 and $40,000; running a longer
national spot costs another $100,000 per week.

Fortunately, there's an alternative. An infomercial or
direct-response TV marketer may be willing to buy your product
wholesale or pay you a royalty based on a percentage of sales. In
return, they put up the entire cost of the production and
campaign.

To find such companies, Hawthorne suggests combing ads in trade
publications such as Response TV or DRTV News.
You've got the best chance of striking a deal if your product
is a unique item that has mass appeal, solves a common problem, can
be easily demonstrated, and costs less than $50 with a markup of
500 percent or more.

Marketers are attracted to infomercials that test well because
they're virtually guaranteed to make back every dollar spent
for advertising. The bonus for you: A successful infomercial will
generate a flood of calls from major retail chains seeking your
product for their shelves.